Homeowners Shelve Remodeling Plans Over Economic Fears
Financial analysis company Sageworks has found remodeling contractors reporting their business is down 3.81% over the last 12 months, a greater pace of decrease than was seen in 2009, when we were in the throes of the recession, says spokeswoman Melinda Crump.
"The fall 2011 U.S. Remodeling Sentiment Report shows that after a year of stabilization in 2010, the unrelenting bad news about the economy this summer is driving many homeowners to reconsider and either delay or scale back their remodeling plans," said Dan Fritschen, founder of Remodelormove.com, in a prepared statement.
The strong pullback was unexpected, Fritschen told DailyFinance. "A year ago, I wouldn't have thought that this is where we would be today. I was surprised by the strong reaction."
Cynthia Ponce of Ponce Construction has seen firsthand homeowners cringing at the thought of ponying up cash right now. "We're a pool and landscape contractor in Southern California, and have been in business for over 24 years," she says. "Lately, we've been given the excuse of 'Your pricing is great, and your work is awesome, but we just want to wait a few months and see what the economy is going to do. We will give you a call, or you give us a call in about three or four months.' "
"There are quite a few people who still have money, but they're scared to spend it right now and just want to wait and see what happens," says Ponce.
But the continued high unemployment and stock market woes fuel fear.
Another clue as to how leery folks are -- those who are going ahead plan to go cheap. Nearly 80% of those who will remodel say they plan to use "economy" materials, compared to 68% who said that at the beginning of this year. And with DIY a perennial money-saving technique, 62% said they planned to do some of the work themselves.
John Boyd of Ridgefield, Conn., had planned to remodel his kitchen and master bath, and then move, but decided not to
Robert Donaldson, on the other hand, couldn't wait for the economy to improve because his renovations were more urgent. "As our family grew, our house had to be renovated. I would estimate that the renovations for the rooms was around $7,000; my wife and I saved up money to afford the renovations," says Donaldson, of Lakewood, Ohio.
"We felt comfortable with the amount we spent on the renovations for a couple of reasons. First, we know that the money spent on renovating the house would improve the performance, aesthetics and resale value of the house. Secondly, we knew that this would be our only window of opportunity to undertake these renovations until our kids were grown and off to college. There are no regrets whatsoever in undertaking and spending money on the renovations to our home. Having finished and comfortable living spaces for our children to enjoy outweighs any regrets." says Donaldson.
There is an upside for renovating now, says Remodelormove.com's Fritschen: "Materials are less expensive, some 20% to 30% less, without sacrificing quality."
Just because the wider economy is uncertain doesn't mean waiting is necessarily your best move, he suggests. "Look at your situation. If you're confident about your income stream and you want to make changes that will improve your home, its value and your lifestyle, then remodeling is a good investment, especially compared to what you can get in a savings account right now."